TOPIC
:Secondary Liability

Breaking: This morning, Judge Pauley of the Southern District of New York issued an opinion granting in part and denying in part (but mostly denying) the defendant’s motion for judgment as a matter of law in Capitol Records v MP3Tunes, in which the jury had found liability for copyright infringement and awarded over $48 million in damages. The opinion is lengthy and fascinating, especially in its characterization of the parties, and particularly the defendant. This post summarizes the rulings on each issue and sprinkles in some of the court’s more colorful commentary. Continue reading »

On April 5, the Second Circuit issued its highly anticipated opinion in Viacom v. YouTube, reversing the District Court’s grant of summary judgment and remanding for further proceedings. Significantly, the opinion marks the first time that a court has drawn a meaningful, substantive distinction between actual and “red-flag” knowledge under the DMCA. This sets it apart from earlier DMCA opinions, including that of the Ninth Circuit in UMG Recordings, Inc. v. Shelter Capital (involving the Veoh videosharing service) and, notably, the lower court opinion in Viacom. Practitioners and ISPs now have some judicial guidance as to how to construe their rights and responsibilities under the DMCA.

Ominously for YouTube, the Second Circuit held that a reasonable jury could find that, under DMCA Section 512(c), YouTube had actual knowledge or awareness of specific infringing activity on its website. Moreover, the Second Circuit ruled that the District Court had incorrectly construed the DMCA’s control and benefit provisions in holding that the “right and ability to control” infringing activity required that the ISP have knowledge of specific, identifiable instances of infringement. Finally, the court affirmed the District Court’s holding that three of YouTube’s software functions fell within the safe harbor for infringement occurring “by reason of user storage,” and remanded for further fact-finding with respect to a fourth software function. Continue reading »

I have been an active member of the Copyright Society of the USA for years, and am currently a member of its Executive Committee. It’s a terrific group for those interested in copyright issues, and maintains chapters throughout the country. I thought readers of this blog might like to know about this upcoming chapter event in Washington, D.C.:

The Washington D.C. Chapter of the Copyright Society of the U.S.A. is holding a membership building event on Wednesday, July 27th, 2011 from 4 p.m. to 6 p.m.

Arent Fox LLP, 1050 Connecticut Ave., N.W., Washington, D.C. 20036, will host the event.
There will be a networking reception from 4: p.m. to 4:30 p.m, followed by the panel discussion from 4:30 p.m. to 6 p.m.

Lawyers who submitted amici briefs to the Second Circuit in the pending appeal of Viacom/Football Association Premier League v. YouTube will debate issues related to copyright safe-harbors for user generated content sites. The case will be argued soon, so don’t miss this opportunity to learn about the issues from experts.

The speakers will include:
Moderator
Robert Kasunic, Deputy General Counsel, U.S. Copyright Office

Any non-member who joins the Copyright Society of the U.S.A. immediately prior to registering for the event may attend for free. Attendance is $40 for non-members and Copyright Society members. Attendance is $25 for Student members of the Copyright Society. Any Copyright Society member who invites a guest who joins the Society immediately prior to registering for the event may attend at half price.

Registration materials and a membership application are at the following link.
http://www.csusa.org/chapters/dc/CSUSA%20DC%20EVENT%20July%202011.pdf

Space is limited. Please register early. The registration deadline is extended to July 25, 2011.

A couple of weeks ago, I reprised my talk on secondary liability and the DMCA for the State Bar of California’s IP Section. I updated my original talk – initially delivered last fall to the ABA – to reflect the current status of the UMG v. Veoh and Viacom v. YouTube appeals, which in the interim were fully briefed (and, in the case of Veoh, argued). You can review the revised and updated outline here.

The outline also notes a late-breaking development in the YouTube case stemming from the United States Supreme Court’s recent decision in Global-Tech v. SEB, a patent case addressing the doctrine of willful blindness. I have posted a fuller analysis of this development over at The 1709 Blog, which you can read here.

YouTube filed its brief Second Circuit brief today in Viacom v. YouTube, in which Viacom and others have sued YouTube for copyright infringement resulting from third parties’ uploading of videos to the YouTube service. See my earlier posts on the District Court opinion here and here; you can find the parties’ District Court briefs here. I haven’t had the opportunity to digest these filings yet, but I will post my thoughts when I get a chance.

A few weeks ago, I gave a talk on secondary liability to the Copyright Subcommittee of the Intellectual Property Litigation Section of the ABA. I examined the impact of the DMCA on traditional doctrines of secondary liability and discussed two significant cases pending at the Circuit level which present knotty questions at the intersection of the statute and common law. These two cases – Viacom v. YouTube, 2d Circuit Case No. 10-3270, and UMG v. Veoh, 9th Circuit Case No. 09-5677 – offer the opportunity for meaningful development of the jurisprudence in this area.

Andy Berger, on his excellent IP In Brief blog, has posted the outline of my talk here. He has also posted his own take on “some of the noteworthy changes to secondary liability” resulting from the passage of the DMCA. Having once squared off in the courtroom against Andy, I can personally attest to the depth and sophistication of his knowledge of copyright. His posts are always worthwhile to read.

You can find my earlier posts on Viacom v. YouTubehere and here. Veoh is likely to be heard before YouTube. I will post the opinions when they are available.

Judge Kimba Wood of the Southern District of New York has issued a permanent injunction shutting down the Lime Wire file-sharing service. The injunction follows the court’s ruling in May finding the service liable for inducing copyright infringement.

In sharp contrast to the voluminous materials submitted by the parties in support of their cross-motions for summary judgment in the Viacom v. YouTube litigation, the court’s opinion granting judgment in favor of YouTube is surprisingly lean. Indeed, a third of the 30-page opinion is devoted to verbatim quotes of the statute and legislative history. The opinion represents a resounding victory for YouTube and, by extension, the rest of the user-generated content industry (for the time being, anyway – Viacom, not surprisingly, has indicated that it will appeal the decision). But – leaving the merits of the dispute aside for a moment – it also represents a lost opportunity for a thoughtful contribution to the jurisprudence in this developing area of law.

Copyright Act Section 512(c) creates a “safe harbor” for internet service providers who allow users to upload copyrighted content to their services. The “safe harbor” shields ISPs from liability for copyright infringement “by reason of the storage at the direction of a user” of infringing material if the service provider meets certain criteria. The ISP must follow prescribed “notice and takedown” procedures to remove materials identified by copyright owners as infringing. Moreover, the ISP must neither have “actual knowledge” that material on the system is infringing nor be aware of “facts or circumstances from which infringing activity is apparent.”

The court’s opinion centers on construing these knowledge provisions. Specifically, “the critical question is whether the statutory phrases . . . mean a general awareness that there are infringements . . . or rather mean actual or constructive knowledge of specific and identifiable infringements of individual items.”

Actual vs. “red flag” knowledge

In my initial post on this decision, I stated that the court “analyzes the Section 512 safe harbor for ISPs and corresponding legislative history.” Upon a closer reading of the opinion, this turned out to be something of an overstatement. Rather, after reciting Sections 512(c) and (m) verbatim, as well as lengthy passages from the legislative history, the court simply concluded, with no discussion whatsoever, “The tenor of the foregoing provisions is that the phrases ‘actual knowledge that the material or an activity’ is infringing, and ‘facts or circumstances’ indicating infringing activity, describe knowledge of specific and identifiable infringements of particular individual items. Mere knowledge of the prevalence of such activity in general is not enough.” Given the size of the case (the complaint sought $1 billion in damages), the significance of the legal issues, and the need for a well-developed body of jurisprudence to guide the ongoing development of new business models and to create settled expectations among copyright owners and users of content, it would have been nice to see a little closer parsing of the language in the statute and legislative history. Clients, in my experience, are never thrilled to be advised on the tenor of the law – they want to know what the law is, so they can act accordingly.

The one comment that the court made on the actual statutory language was in connection with subsection (m), which “explicit[ly]” states that the DMCA “shall not be construed to condition ‘safe harbor’ protection on ‘a service provider monitoring its service or affirmatively seeking facts indicating infringing activity . . .” Seizing on that language, the court noted, as a policy matter, that letting “knowledge of a generalized practice of infringement in the industry, or of a proclivity of users to post infringing materials, impose responsibility on service providers to discover which of their users’ postings infringe a copyright would contravene the structure and operation fo the DMCA.”

Having thus dispensed with statutory analysis, the court went on to recite the holdings of the Ninth Circuit and two of its district courts in cases where similarly situated defendants were found to be unaware of “facts and circumstances” sufficient to constitute red flags under the DMCA. As with its discussion of the statute itself, the court engaged in no meaningful analysis of these opinions. The court also cited favorably the Second Circuit’s opinion in Tiffany v. eBay, Inc., 600 F.3d 93 (2d Cir. 2010), a trademark case. In eBay, Tiffany sued eBay for contributory trademark infringement because eBay allow sellers of counterfeit goods to continue to operate despite knowing, generally, that counterfeit Tiffany goods were being sold “ubiquitously” on the site. The Second Circuit ruled for eBay, holding that it could not be liable unless it had knowledge of particular listings of counterfeit goods; the Viacom court concluded, “[a]lthough by a different technique, the DMCA applies the same principle. . . .”

Direct financial benefit where the ISP has the right and ability to control the infringing activity

Section 512(c) also prohibits an ISP from receiving “a financial benefit directly attributable to the infringing activity, in a case in which the service provider has the right and ability to control such activity . . .” The parties hotly disputed whether YouTube had the right and ability to control the activity of users who uploaded infringing content, with each side devoting several pages of briefing to the issue. Again, the court’s opinion gave the issue short shrift, holding without citation or elucidation that “[t]he ‘right and ability to control’ the activity requires knowledge of it, which must be item-specific,” and citing back to the sections of the opinion addressing the knowledge requirement.

I was especially disappointed that the court did not address the question whether YouTube received a direct financial benefit from the allegedly infringing activity, though I recognize that the court did not need to reach the issue given its ruling (however cursory) on the right and ability to control the activity. But there is a bothersome discrepancy between the traditional common-law doctrine of vicarious liability and the form of it enacted in the DMCA. Recall that in Fonovisa, Inc. v. Cherry Auction, Inc., 76 F.3d 259 (9th Cir. 1996), a flea-market operator was held vicariously liable for the sale of bootleg recordings because it received a “direct financial benefit” from the infringing activity in the form of booth rental fees, admission fees, parking payments, concession stand revenues, and the like. Even though these revenues were not directly tied to the sale of infringing goods, they were held to provide a direct financial benefit because the sale of pirated recordings was a “draw” for customers.

The legislative history of the DMCA, in part, states that the drafters intended to leave “current law in its evolving state” rather than “embarking on a wholesale clarification” of the doctrines of contributory and vicarious liability – suggesting that it did not intend to modify Fonovisa and its progeny. Yet elsewhere, the legislative history states that “a service provider conducting a legitimate business would not be considered to receive a ‘financial benefit directly attributable to the infringing activity’ where the infringer makes the same kind of payment as non-infringing users of the provider’s service.” This statement suggests that the booth rental fees and other revenues not directly tied to bootleg sales in Fonovisa would not constitute a direct financial benefit – setting up a conflict within the legislative history and with Fonovisa.

“Where does this appeal go? It goes up.” (bonus points if you can identify the riff)

It can come as no surprise that Viacom intends to appeal, and it will be very interesting to see what the Second Circuit thinks of this opinion. I will post appeal briefs when they are available.

For those of you feeling nostalgic for the ’80s after seeing the photograph at the beginning of this post, you can view the clip of the original Wendy’s “Where’s the Beef” commercial here, thanks to one laconic judge in the Southern District of New York.

Today Judge Louis Stanton granted YouTube’s motion for summary judgment in the Viacom v. YouTube litigation – an incredibly quick decision in almost any case, but especially here, where the parties filed tremendously dense briefs and supporting declarations with hundreds of pages of exhibits. Viacom v. YouTube, No. 07-2103 (S.D.N.Y. filed June 23, 2010). The opinion is hot off the presses and I have not yet read it in its entirety, but in a significant holding, it analyzes the Section 512 safe harbor for ISPs and corresponding legislative history, concluding that “the phrases ‘actual knowledge that the material or an activity’ is infringing, and ‘facts or circumstances’ indicating infringing activity, describe knowledge of specific and identifiable infringements of particular individual items. Mere knowledge of prevalence of such activity in general is not enough.”

There is more – I will post further thoughts once I’ve had a chance to digest the entire opinion. Hat tip to my colleague, Raffi Zerounian, for spotting this and bringing it to my immediate attention.

About Naomi Jane Gray

Naomi Jane Gray is a principal in the law firm Shades of Gray Law Group, P.C., where she focuses her practice on intellectual property litigation, prosecution and counseling, with a particular emphasis on copyrights and trademarks.